ABSTRACT
Tradable emission markets continue to be promoted as a cost effective tool to manage global public goods such as climate protection. A prominent example of such global emission trading systems is in the 1997 Kyoto Protocol (UNFCCC 1999). Recall the Kyoto Protocol required the leading industrialized countries to reduce their greenhouse gas (GHG) emissions by an average of 5 percent below 1990 levels by 2008-12.1 These reductions are severe relative to current GHG emission rates and will likely be costly to achieve (e.g. see Nordhaus and Boyer, 2000; Shogren, 2004). To minimize control costs, Kyoto allows for some flexibility in GHG mitigation, including the international trading of GHG emission quotas (Article 17).
